Technical indicator

Williams %R

Williams %R, developed by Larry Williams, shows where the close lies relative to the highest high of the last n periods. It is the Fast Stochastic Oscillator on an inverted scale, from 0 to −100.

Type

Momentum oscillator (0 to −100)

Typical parameters

n = 14 days

Main signal

Turns up from below −80 (buy) or down from above −20 (sell)

What Williams %R shows

A reading near 0 means the close is at the top of the recent range; near −100 means it is at the bottom. Values from 0 to −20 are considered overbought, values from −80 to −100 oversold.

Calculation

where H_n and L_n are the highest high and lowest low of the last n periods and C_t is the current close. Since %R = %K − 100, the two indicators always give the same picture.

Trading signals

• Level signals: buy when %R falls below −80 and then turns up; sell when %R rises above −20 and then turns down.
• Direction signals: buy when %R changes direction upward; sell when it changes direction downward.
• In a strong uptrend %R can stay overbought for a long time, so wait for the turn rather than selling as soon as it crosses −20.